Berlin's Political Conundrum Voters Furious over Surging Energy Prices

Natural gas prices are expected to rise by 40 percent in Germany. A battle of the populists has begun as politicians promise to put more money into citizens' pockets. But any financial relief will likely be eaten up before long by rising energy costs.

By , Wolfgang Reuter and Christian Schwägerl


German politicians are feeling the heat over high oil and gas prices.
DPA

German politicians are feeling the heat over high oil and gas prices.

Russia has built a wall to separate itself from the impoverished, despised West, which is completely dependent on Russian natural gas. The Russian people, though affluent, are brutally oppressed. Russia has returned to a system of feudal structures. Its closest ally is a high-tech China, which has long ago taken over the aircraft manufacturer Boeing. Europe is kept in a constant state of fear that its gas supply will be shut off and its lights will go out.

This is the world of 2027, at least the way Russian novelist Vladimir Sorokin imagines it in his dark novel, "The Day of the Oprichnik." It is a look into the future that no longer seems quite as far-fetched, now that a new number has made its debut. That number is 40, which represents the predicted percentage rise in the price of natural gas in Germany, announced a little more than two weeks ago by Michael Müller, a deputy minister in the German Environment Ministry.

There are numbers that change everything in politics. This number, 40 percent, dominated almost every political conversation last week. German Chancellor Angela Merkel discussed the number with French President Nicolas Sarkozy on Monday, with US President George W. Bush on Tuesday and with her German colleagues in a coalition meeting on Wednesday.

That same number, 40 percent, will continue to figure prominently in the future. On Monday, the center-left Social Democratic Party's parliamentary group unveiled a program designed to soften the social impact of higher energy prices. The government of Saudi Arabia has invited world and industry leaders to a hastily called energy summit in Jiddah on June 22. Although Merkel will be unable to attend, she is sending Economics Minister Michael Glos instead. The European Union plans to discuss the issue at its next summit.

The number, 40 percent, becomes even more compelling when it is linked to other numbers. A week ago last Friday, it became known that the world would have to build 1,344 nuclear power plants to reduce emissions of the greenhouse gas carbon dioxide to half of its current level. When the IAEA announced the number at a meeting of the G-8 energy ministers in Tokyo, the German energy minister found himself under more pressure than usual, because Germany plans to abandon nuclear energy completely by 2022.

And there is another number currently causing a flap. According to a new survey by the Bertelsmann Foundation, only 31 percent of Germans have a favorable opinion of the social market economy. It is a number that is clearly influenced by high energy prices and the sense that the current German recovery has not benefited most citizens.

Taken together, all these factors make for a dismal mix for German and international policies. The issues at the top of today's agenda are global warming, the growing scarcity of raw materials and commodities, and fears of social decline. The challenge for politicians is to figure out how to reconcile goals like energy security, protecting the environment and achieving prosperity for all. Merkel regards the current situation as the most dramatic she has experienced since German reunification in 1990.

The question Merkel is asking is this: Are we about to lose an incredibly important political instrument? The instrument is called tax relief, and it consists of political measures that put significantly more money into citizens' pockets. These measures are needed to preserve or expand prosperity, as well as to reconcile citizens with the political world.

If, as the coalition government in Berlin has planned, German taxpayers' contribution to unemployment insurance is soon reduced from 3.3 to 3 percent, Germans will see their monthly disposal income increase by the paltry sum of about €8 ($12). If the price of gasoline continues to rise, this small gain will quickly be eaten up the next time they fill up at the pump. With numbers like these, the widespread sense of not benefiting from Germany's economic recovery will never go away.

Graphic: The rising cost of energy
DER SPIEGEL

Graphic: The rising cost of energy

Merkel fears that, in the future, any measure designed to provide financial relief will be perceived as such for no more than two weeks -- at which point citizens will already be clamoring for the next measure. But no government is capable of providing enough tax relief to offset the anticipated rise in energy prices.

Those prices have already skyrocketed. In 1997, the Germans spent €69 billion ($107 billion) on electricity, heating and fuel. By 2007 -- a year with a warm winter -- that combined figure had increased to €95 billion ($147 billion). Low-income households are especially hard-hit by higher energy costs.

Despite the questionable effectiveness of the approach, the parties are now looking to develop new tax relief plans. Members of parliament in the SPD parliamentary group exchange heartbreaking stories from their electoral districts. "I get a sense of it when I drop off my children at kindergarten in the morning," says Bonn member of parliament Ulrich Kelber, the SPD's deputy floor leader, who is responsible for environmental and energy issues. "Many people tell me that they simply can't handle the burden anymore." Other members of parliament say that they haven't seen so many of their constituents break down in tears in a long time. "We have to be careful," says Kelber, "that frustration doesn't turn into sheer rage."

To address such concerns, the leaders of the SPD parliamentary group planned to convene on Monday evening to discuss ways the coalition government should respond to the explosion of prices. There is a long list of proposals, most of them coming from Environment Minister Sigmar Gabriel (SPD). He plans to boldly proclaim an "efficiency century," which, according to Gabriel, must follow a century of waste.

Gabriel wants the electric utilities to offer special discounted rates for the first 500 kilowatt hours, and if the utilities refuse to play along, he wants to see legislation adopted that would require them to offer a discount program. He also wants to eliminate all privileges for company cars, halve the rate of value-added tax for long-distance rail travel and reduce property taxes for owners of older buildings that are upgraded to make them more energy-efficient.

Gabriel also proposes introducing special allowances for energy costs when the rates of Germany's controversial "Hartz IV" welfare program are adjusted in the autumn. Even subsidies for energy-efficient refrigerators are under consideration. Conversely, Gabriel wants to see fines imposed on landlords who do not upgrade their buildings to meet energy efficiency standards required by law -- and even rent reductions for tenants.

But Gabriel's proposals have already come under fire from two sides within his own party. Rainer Wend, an SPD economics expert, warns of too much state intervention. Deputy Environment Minister Michael Müller believes that, instead of introducing new subsidies, it is more effective to reduce the value-added tax rate for anything that promises energy efficiency. "Then saving energy would be twice as worthwhile for citizens," he says.

Even Ulrich Kelber, a pioneer of socially-minded energy policy, fears that the debate over price subsidies could get out of hand and ultimately cement the country's dependency on oil and natural gas. In that case, Kelber argues, people could continue to waste energy without fearing any consequences. "If we don't watch out," he says, "this autumn will be dominated by the populists."

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